N.J. improves to 49th in study of tax climate

By October 9, 2012 at 1:50 PM

Gov. Chris Christie's vow to improve New Jersey's rank in an annual state business tax climate report came through, but an economist with the nonpartisan Tax Foundation said the governor has New York to thank for the improvement.

Though Tax Foundation economist Scott Drenkard said "New Jersey and New York have been sparring for the bottom spot for years, with New Jersey often placing below New York," the state outranked New York in terms of business-friendly tax policies for 2013 — securing the 49th spot, as New York placed last.

While Drenkard said the Christie administration's move to block the so-called "millionaire's tax" kept New Jersey out of 50th place for what would have been the second straight year, he said the state only moved up because New York's increase of top earners' personal income tax caused it to fall — since individual income tax had more weight in the results than corporate tax.

Christie spokesman Michael Drewniak said the report shows New Jersey is "moving in the right direction, and it's all up from here," but he said, more importantly, New York's slip serves as a warning to any legislative efforts to increase taxes.

"The study illustrates the absolute folly of increasing taxes, which New Jersey Democrats have been hell-bent on doing since we arrived in Trenton," Drewniak said. "Look where that got New York. Now, imagine where we'd be if the Democrats would just pay attention, get on board and approve the tax relief we continue to fight for."

Even accounting for New York's personal income tax increase, Drenkard said New Jersey only scored a few thousandths of a point above New York in terms of overall business tax climate, as New York outranked New Jersey in the corporate tax, sales tax and property tax brackets.

Drenkard said both states' scores included the same penalty for offering tax incentives, since he said the credits "drive up tax rates for companies that don't qualify for them, distort the market and often fail to achieve economic growth." But even if New Jersey had eliminated investment, job and research and development tax credits for 2013, Drenkard said the state "wouldn't improve its score enough to overcome California," which placed 48th despite not having an incentive program in place for companies investing in new properties.